Brian Hutchinson: HST vote repudiation of B.C.’s Liberal government

The people have spoken, and B.C.’s Liberal government has been properly smacked. The result of B.C.’s harmonized sales tax referendum, a measure brought by the people and supported by the courts, was revealed Friday. Almost 55% of eligible voters who mailed ballots chose “yes” on the question of whether to repeal the HST.

B.C. Finance Minister Kevin Falcon met with reporters shortly after the result was announced and said the government will seek to restore the old provincial sales tax system by March 31, 2013. He said that exemptions on products and services under the old system — seven per cent PST on some goods and services, plus five per cent federal GST — will return. He said he was disappointed with the referendum result but not surprised.

A spokesman for Mr. Falcon’s federal counterpart, Jim Flaherty, said Ottawa expects to recover $1.6-billion in “transitional assistance” funds it gave B.C. as part of an HST agreement the two governments hastily forged in 2009. The tax came into effect July 1, 2010.

Whatever its technical merits, whatever else the province will have to pay for this reversal in course, the 14-month-old harmonized sales tax measure was unpopular with voters. It was good policy, many economics argued. Vile politics, cried many more B.C. taxpayers. The HST was introduced by surprise and disingenuously, weeks after a 2009 provincial election campaign in which it had played no role, by former premier Gordon Campbell and his ministers; they thought it unnecessary to consult with constituents first. Once the public latched onto a process of disposal, via a citizens petition and then referendum, the tax had little chance.

It was blown to smithereens. The people lit the fuse but government laid the dynamite. Under provincial rules, the referendum was to be non-binding, but last year Mr. Campbell declared his government would bow to a simple 50 per-cent-plus-one majority vote. A month later, he promised a broad income tax cut, another arbitrary and erratic gesture. People tossed that one back in his face. He was done. Mr. Campbell announced his attention to resign and left office in March, three months before five million HST ballots were mailed to eligible B.C. voters.

Successor Christy Clark determined to save the tax; it was, after all, efficiently dumping billions of dollars into the treasury, and revoking it and returning to the old system would be costly. She also believed a repeal would shake the confidence of key business leaders and groups in the province, and make B.C. less competitive than Ontario, which had also adopted harmonization in 2010. Under their new system, Ontarians pay 13% HST on most goods and services, yet resistance to the tax has been minimal. This underlines how badly the B.C. dropped the ball.

Premier Clark pledged that her government would cut the HST by two percentage points by 2014, should the tax survive the looming referendum. But this missed the mark; the HST represented to British Columbians a betrayal of trust. Of course, they weren’t happy paying 12% tax on goods and services previously subject to the GST only. The HST was applied to many more things than the old PST, including vitamins, over-the-counter medications, restaurant meals, home telephone services, live entertainment, domestic air, bus and rail travel, gym memberships and new homes. (The sales tax on alcoholic beverages actually dropped, from 15% to the HST rate of 12%). But tinkering wasn’t going to help.

A new opposition party leader, Adrian Dix, played tough, slamming the HST and claiming its introduction was built on “lies.” The provincial Liberals had “made a deal with the federal government and sold us out,” Mr. Dix told reporters in June. True or not, it’s what a majority of British Columbians have felt, people of all political stripes, and they made their position clear on their mail-in ballots.

Premier Clark waited until late Friday afternoon to discuss with media the result. She expressed her regret. But she can count herself fortunate, because the HST imbroglio lies at her predecessor’s feet, and Mr. Campbell is long gone, to London, as Canada’s new high commissioner to Britain. Ms. Clark wields majority power in B.C.’s legislative assembly, and she has the ability to choose her next course. By law, B.C. must hold a provincial election by May 14, 2013. Premier Clark will either test her government’s strength at the polls, as early as this fall, perhaps, or she will wait.

“I’m going to be focused on the creation of jobs until May 2013,” Premier Clark told reporters. She allowed herself a caveat: “If that’s when the election is held.”

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